China Home Prices Gain in Half the Cities as Market Steadies

China’s new home prices rose in
October in more cities than the previous month, indicating the
government will refrain from relaxing curbs on the property
market.

Prices climbed in 35 of the 70 cities the government tracks,
compared with 31 in September, according to data from the
statistics bureau yesterday. Prices fell in 17 cities.

Investors are gauging the government’s policy direction on
real estate, rolled out over two years to rein in surging home
prices that raised concerns about affordability, after the
Communist Party unveiled the new generation of leaders last week.
The measures have had a “relatively good” effect and the
government will “steadfastly” enforce property controls,
Housing Minister Jiang Weixin said in Beijing last week.

“The government has sent out signals that they will not
loosen property policies because they don’t want to see a big
price rebound,” said Shen Jian-guang, a Hong Kong-based
economist at Mizuho Securities Asia Ltd. “At the National
People’s Congress next March, it probably could claim victory
for controlling property prices.” Delegates and officials
gather every March for the annual meeting of the National
People’s Congress, the highest governmental body.

Maintaining Curbs

The northwestern city of Urumqi led gains in October, with
a 0.5 percent increase from September, according to the data.
Among major cities, the southern business hubs of Guangzhou and
Shenzhen recorded gains of 0.4 percent each. Beijing prices rose
0.2 percent, while those in Shanghai and 17 other cities were
unchanged.

A gauge tracking property shares on the Shanghai Composite
Index (SHCOMP) fell 0.5 percent to the lowest in three weeks at the local
close, making it the only measure that declined among the five
industry groups on the benchmark.

The government wants to maintain the curbs because steady
sales and mild price growth are the “exact situation” it wants
to see, while further tightening will damp a tentative recovery
in the Chinese economy, Alan Jin, a Hong Kong-based property
analyst at Mizuho Securities Asia Ltd., said before the data.

China’s gross domestic product slowed to 7.4 percent in the
third quarter from a year earlier, the weakest in three years,
while gauges of manufacturing and retail sales have pointed to a
recovery.

Existing Homes

Home prices rose in 12 cities from a year earlier, the same
as in September, the data showed.

“With prices rising or unchanged in the majority of the
cities, the downward trend in China’s home prices has been
restrained,” said ANZ’s Liu. “Buyers are now holding a wait-
and-see position for the policy direction after the new
generation of leadership came out.”

Existing home prices were unchanged in Beijing last month
from September and increased by 0.2 percent in Shanghai.

Real estate prices in China rose 160 percent in the 1998-
2011 period after the country privatized the property market,
according to government data.

In its more than two-year effort to curb the property
market, the central government has raised down-payment and
mortgage requirements, imposed a property tax for the first time
in Shanghai and Chongqing, increased building of low-cost social
housing, and placed home-purchase restrictions in about 40
cities.

Property Tax

Many Chinese cities are preparing to introduce property tax
trials, China Securities Journal reported on Nov. 16, citing
unidentified people. The central government hasn’t yet decided
on their scale and timing, it said.

“Given the strength of the rest of the economic data, we
don’t think the government is likely to provide stimulus to the
housing sector,” said Michael Klibaner, head of China research
at Jones Lang LaSalle Inc., in an interview in Shanghai. “If
there’s concern about the economy, we would expect it to support
the first-time home buyers through mortgages and the public
housing fund.”

Private data also has shown the housing market is
stabilizing. Home prices gained 0.17 percent in October,
advancing for a fifth month, according to SouFun Holdings Ltd. (SFUN),
the nation’s biggest real estate website owner.

Developers’ Sales

Contracted sales at 11 major developers were 57.3 billion
yuan ($9.2 billion) in October, up 24 percent from September and
41 percent from a year earlier, according to Ryan Li, an analyst
at JPMorgan Chase & Co. in Hong Kong. It was the best month
since developers started releasing monthly data in January 2009.